The Maintenance/Purchasing Partnership
Kathy | March 1, 2007
Because of its use of consumable products and need for replacement maintenance repair and overhaul (MRO) inventory items, the Maintenance department must requisition and contract through the Purchasing department on a daily basis. If equipment reliability is to be assured, the direct working relationship between these departments must be a good one built on an understanding of each other’s mandate and clear lines of communication.
The approach toward procuring purchased items varies greatly from organization to organization. Large ones will often support a selfregulated purchasing group; medium to small organizations may rely on Maintenance to perform shared purchasing/expediting duties with a single buyer-or even relinquish all purchasing duties to a contracted third-party inventory-management company. Regardless of the approach, building a workable Maintenance/Purchasing relationship will depend greatly on how well the following types of complaints are managed.
Examining typical complaints from the perspective of both partners leads to the formulation of a workable approach that allows Maintenance to focus on delivering equipment availability and reliability, and Purchasing to focus on procuring products that deliver the best value for the least amount of expenditure.
Typical Complaints #1
Maintenance: “Purchasing never recognizes the urgency of our purchasing needs, requiring us to take our own measures to ensure the part gets here fast enough, especially on a breakdown job when the line is down and we need the parts here now!” Purchasing: “Maintenance always is trying to side-step the procurement process and expedite parts behind our back, often agreeing to outrageous delivery costs to get things here faster.”
Unfortunately, many Maintenance organizations are still purchasing items as a direct result of reactive situations. Maintenance departments that actively engage in proactive maintenance strategies (preventive, predictive, condition-based) linked to the planning and scheduling of maintenance events are better able to provide Purchasing with enough lead-time fl exibility to procure the part with the best delivery option (no more expensive air freight or taxi delivery charges).
Clearly defining the role(s) of each department (Maintenance/Purchasing) allows any size organization to map out the procurement business process specific to the organization, as well as set up clear levels of responsibility. Using a template similar to that shown in Fig. 1, both departments meet to discuss which department is best suited to take on what role based on expediency and ability to perform the role. With roles decided, the workfl ow is now diagrammatically mapped indicating the responsible department for each action. This enables both departments to follow a structured approach and commence working trust in one another.
Typical Complaints #2
Maintenance: “Purchasing always buys the cheapest product or service it can find.” Purchasing: “Maintenance doesn’t understand that we have a mandate to continuously reduce purchasing costs.”
Establishing MRO-item purchasing programs based on Life-Cycle Costing (LCC) is paramount for reducing downtime costs, equipment repair costs and procurement costs. An LCC program begins with both departments understanding the fundamental difference between price and cost.
When purchasing a replacement MRO item, price is the money paid to receive a quality item FOB (Freight On Board) at your plant, through regular shipping methods.
Cost is attributed to the equation when additional money is spent without value, as depicted in the following scenarios:
- Price plus additional money for emergency shipping
- Price plus additional money spent to administer and wait for the return of defective, inferior quality items
- Price plus additional money spent for accelerated replacement and incurred downtime costs of less expensive, inferior quality items (lower cost items with lower Mean Time Between Failure [MTBF] life-cycle reliability ratings)
Purchasing the least expensive item may make sense initially when buying on price alone, as indicated in the Fig. 2 examples. Product A, priced at $10, is twice the price of the $5 Product B. Purchasing Product B over A gains an immediate 50% price saving.
However, taking life-cycle expectancy into account changes the scenario considerably.
Product A has a life expectancy of three years, whereas Product B is a lower-quality manufactured part with an expected life expectancy of only one year. Over a three-year period, Product B is changed out three times compared to Product A, which actually increases the purchase price by 50% over the life-cycle of the more expensive part (1 x $10 expenditure vs. 3 x $5 [$15] expenditure).
Furthermore, purchasing the lower-quality Product B incurs two more sets of additional costs associated with downtime of the equipment, maintenance replacement costs, purchasing administration costs, work order administration costs and inventory management costs over the life cycle of Product A.
Working together to understand and make buying decisions based on Life-Cycle Costing dramatically reduces operations, maintenance and purchasing costs.
Typical complaints #3
Maintenance: “Purchasing never seems to purchase the right part.”
Purchasing: “Maintenance never gives us the correct information to order in the correct part.”
Solution… Once again, clear lines of communication are vital to attaining mutually desired outcomes. Setting up a minimum information requirement for the purchase requisition, preceded by a detailed part specification standard, as outlined in the Fig. 1 template, will significantly reduce the chances of an incorrect part purchase.
Typical complaints #4
Maintenance: “We always get blamed for downtime.”
Purchasing: “Downtime is not a purchasing problem.”
Downtime is everybody’s problem. This becomes more apparent when a Value Stream Map is created for the organization depicting intra-department input/output relationships. Taking a facilitated approach, both Maintenance and Purchasing must work together to become consistent in their methods of procuring and using parts. We already have seen that purchasing parts based on LCC can signifi- cantly reduce downtime-something that is brought about through understanding and collaboration between Maintenance and Purchasing. Other collaborative acts resulting in cost reduction can include:
- Initiating a preferred vendor or supplier program based on quality products, service, delivery and reasonable pricing policy
- Developing a parts specification book based on existing preferred parts and vendors that have historically shown good life-cycle tendencies
- Involving Purchasing in Maintenance planning and scheduling meetings
Purchasing is a very important part of your equipment maintenance process. Thus, it is well worth the investment to create a cooperative environment between your Maintenance and Purchasing groups.
Ken Bannister is lead partner and principal consultant for Engtech Industries, Inc. Telephone: (519) 469-9173; e-mail: firstname.lastname@example.org